Coty (COTY) Q1 2025 (Q&A) earnings summary

Executive summary

• Q1 FY25 net revenues grew 2% reported and 4.5% LFL, driven by strong prestige fragrance growth, gross margin expansion, and robust online sales, despite FX and divestiture headwinds.

• Prestige segment delivered 5% reported and 7% LFL revenue growth, with double-digit LFL growth in leading fragrance brands and successful blockbuster launches.

• Consumer Beauty revenues declined 3% reported and were flat LFL, with U.S. mass color cosmetics weakness offset by strong mass fragrance and skincare.

• The company outperformed peers in 9 of the last 13 quarters, with continued expansion in growth engine markets and strong innovation pipeline.

• Operating income rose 20% to $237.8M, with margin improvement to 14.2%, and net income surged to $82.9M from $1.6M.

Financial highlights

• Q1 net revenues: $1,671.5M (+2% reported, +4.5% LFL); Prestige: $1,114.1M (+5% reported, +7% LFL); Consumer Beauty: $557.4M (-3% reported, flat LFL).

• Gross margin expanded by 200 bps to 65.5%, driven by manufacturing efficiencies and lower obsolescence costs.

• Adjusted EBITDA was $360.1M (margin 21.5%), flat YoY; adjusted EPS up 20% YoY to $0.18.

• Free cash outflow was $7.9M, down from $124.0M inflow YoY, due to order phasing and higher receivables.

• Net cash from operating activities was $67.4M, down from $186.2M, mainly due to higher working capital outflows.

Outlook and guidance

• FY25 adjusted EBITDA expected to grow near the lower end of +9-11% YoY guidance, with margin expansion close to 100 bps.

• FY25 adjusted EPS expected at the low end of $0.54–0.57, reflecting mid-teens percentage growth.

• FY25 free cash flow projected to grow double digits YoY to low-to-mid $400M range; leverage targeted below 3x by year-end and ~2x by end of CY25.

• LFL sales growth for H1 and H2 expected at 3–4%, with sequential acceleration in profit growth in H2.

• Over $120M in FY25 cost savings anticipated, up $45M from initial target.